The great generational wealth transfer

A roadmap for ultra-rich UAE families to set up family offices

By Sandeep S. Jadwani

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Published: Mon 22 Apr 2024, 4:20 PM

Last updated: Mon 22 Apr 2024, 4:21 PM

The sands of wealth are shifting in the Middle East. A staggering $84 trillion is expected to change hands globally over the next decade, with the UAE alone witnessing a monumental $1 trillion (Dh3.67 trillion) flowing from high-net-worth families (HNWIs) to the next generation. This phenomenon, dubbed the “Great Generational Wealth Transfer,” presents both immense opportunities and significant challenges.

The great wealth transfer signifies the passing of family wealth from one generation to the next. This monumental shift is currently unfolding, poised to reshape both our economic and social landscapes globally.

This ‘Great Generational Wealth Transfer’ is a reality, just like the visionary projects that have shaped this region. A large UAE family conglomerate in 2022, for example, successfully transitioned their business across generations, preserving their legacy while fuelling innovation. But navigating this wealth transfer can be complex.

Let us explore the opportunities and challenges specific to the UAE context and delve into the tools available to navigate this wealth transfer smoothly.

A trillion-dollar opportunity: Building a legacy for generations

This wealth transfer is a testament to the entrepreneurial spirit of the region. Imagine the impact it can have – funding education for future generations, fuelling innovation, and establishing a philanthropic legacy that leaves a lasting mark. This is the potential that lies within your grasp.

While the numbers are impressive, successful wealth transfer goes beyond just financial planning. Lombard Odier’s research shows that while 87 per cent of HNWIs in the Middle East believe their businesses are ready for succession, only 24 per cent have a concrete estate plan in place. This highlights the need to address not just the financial aspects, but also the emotional complexities of wealth transfer within families. Unspoken expectations and a fear of losing control can create a communication gap between generations.

Challenges on the horizon: Crossing the generational divide

Navigating this transfer requires careful planning. Here are some of the hurdles we can anticipate:

Internal hurdles:

- The Unspoken Conversation: Many families struggle to have open and honest discussions about wealth. This can lead to emotional strain and misunderstandings between generations.

- The disconnect between generations: Heirs might have unrealistic expectations or unspoken resentments, while founders might struggle to relinquish control.

External obstacles:

- A Global labyrinth: Cross-border businesses and international assets introduce a complex web of laws and tax implications that can lead to unforeseen burdens for your heirs.

- Sharia considerations: For Muslim families, ensuring plans adhere to religious principles is paramount. Traditional wealth management solutions might not provide the necessary expertise.

The UAE: A gateway with unique considerations

The UAE, with its international environment and lack of infrastructure debt, presents a lucrative hub for wealth management. However, the current wealth management landscape often offers a fragmented or transactional service, failing to rovide the holistic approach needed for successful wealth transfer.

The UAE government recognised this need for change. The launch of the Dubai International Financial Centre’s global family business and private wealth centre in August 2022, exemplifies their commitment to addressing these very issues.

Beyond transactions: Building a bridge with a holistic approach

Traditional wealth management often focuses on individual aspects of wealth, such as investments or taxes. A family office can shoulder many of the complexities, both financial and non-financial, that ultra-high-net-worth families deal with every day

Bridging the gap: As a trusted adviser, facilitating open communication between generations and ensuring everyone understands their roles and responsibilities in the wealth transfer process is epitome.

Global expertise: They can navigate the complexities of cross-border assets and international regulations, minimizing burdens on your heirs.

Sharia-compliant solutions: They work with specialists to create plans that seamlessly integrate with your religious principles.

Family dynamics: They address potential conflicts arising from inheritance decisions and help foster a sense of shared purpose and stewardship amongst beneficiaries.

Sandeep S. Jadwani, Head of Investment Advisory, Habib Investment Limited
Sandeep S. Jadwani, Head of Investment Advisory, Habib Investment Limited

As a family builds wealth across generations, managing finances and everyday matters becomes increasingly intricate. Overseeing investments, real estate, records, and household needs – all while planning for philanthropy – requires significant time and expertise.

To ensure long-term success, families need a shared vision for their wealth. Open communication is crucial, as misunderstandings can damage both family harmony and financial well-being. Wealth unlocks doors and creates possibilities, but only with proper stewardship. Building a legacy requires careful planning and honest conversation, preparing heirs to embrace both the benefits and responsibilities.

Difficult conversations about wealth are inevitable, especially when family members have different priorities. However, families that overcome these challenges and work towards a common purpose are better positioned to safeguard, preserve, and even grow their legacy.

Enter the family office: Tailored solutions for wealthy families

Ultra-high-net-worth families often leverage family offices – specialised firms offering services to meet each family’s unique financial and non-financial needs. Family offices can handle many complexities, both financial and personal, that come with immense wealth. Naturally, these customised services come at a cost. Determining if a family office is the right fit requires a clear understanding of your needs versus the associated expense.

Considering a family office? Here’s what to evaluate

The family office industry lacks a universal definition, leading to some confusion. While some investment firms position themselves as alternatives, they often lack the comprehensive services offered by a true family office.

Here’s a closer look at the services typically provided by a family office:

Investment management: Allocating assets, selecting and vetting investment managers, and generating performance reports.

Estate and tax planning: Designing sophisticated estate plans, managing income taxes, and preparing tax returns.

Liability management: Assisting families in leveraging assets for financing, while also monitoring overall debt exposure.

Risk management: Guiding families in acquiring insurance (property, casualty, and personal), as well as cybersecurity solutions.

Philanthropy: Assisting with charitable giving strategies, creating suitable giving vehicles, conducting due diligence on grant recipients, and handling administration and bookkeeping.

Recordkeeping and reporting: Managing everyday finances, from bill payments for staff and services to generating financial statements.

Lifestyle management: Overseeing primary and vacation residences, and providing concierge services like travel and healthcare support.

Family dynamics and education: Facilitating family meetings, educating family members on financial and other matters, and helping develop the family’s mission, vision, and values.

The number of services offered by a family office can vary greatly. Ultimately, the decision of whether to utilize a family office hinges on your specific needs, budget, and how much value you place on privacy and maintaining control over your wealth. The Great Wealth Transfer represents a seismic alteration in wealth distribution. It is imperative for both current and future generations to be thoroughly prepared for this historic transition.

Family offices can be powerful tools for ultra-high-net-worth families. They act as a central hub, managing everything from investments and real estate to recordkeeping, philanthropy, and even household management. This allows families to focus on their legacy and vision for the future. However, family offices come at a cost, so it’s important to determine if it’s the right fit for your specific needs.

The great generational wealth transfer presents a unique opportunity for families in the UAE. By working with a specialist who understands the complexities of wealth transfer and the cultural nuances of the region, you can ensure your wealth becomes a springboard for future generations, not a burden.

Sandeep S. Jadwani - ACSI, CIB (Head of Investment Advisory, Habib Investment Limited – Regulated by DFSA) is qualified, experienced and an award-winning financial adviser to High Net-worth Individuals. Been in the UAE for over 15 years and guiding individuals and families to efficiently and effectively manage their finances to achieve their financial goals. Connect with him on Instagram @sandeep_investmentadvisor and Linkedin -

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